An Open Letter to Warren Buffett Re: Berkshire Hathaway Investment in Wells Fargo
Brian McKay
09/12/2016
Published on zenruption.com
Warren Buffett, Chairman and CEO
Berkshire Hathaway Inc.
3555 Farnam Street
Suite 1440
Omaha, NE 68131
Mr. Buffett;
You have been a business and investing hero of mine for years. Study of your life, principles, investment ideology and management tenants, has been instrumental in formation of my own ideology and practices in business and seeking out value creation. In the past, Berkshire Hathaway has made investments in wonderful businesses that create value. Your purchases of companies such as RC Wiley, Nebraska Furniture Mart, See’s Candies and BNSF Railroad have all represented investments in great management and value creation.
As a philanthropist you have created a standard that is beyond amazing. You sir have nothing but my absolute respect.
This letter is to warn you that I believe you have been sold a lie by a con man in a $400 tie. Currently, you are the single largest investor in Wells Fargo Bank N.A. and wield considerable power in the valuation of the organization and the validation of executive management. As you are certainly aware, Wells Fargo Bank N.A. is embroiled in a scandal that threatens its business and customer base. This scandal is nothing new for them and will not be abated in the future either. Unlike past management you have invested in, this time you were sold an investment into nothing more than gross hypocrisy and value destruction. Customers are now leaving, borrow costs are now higher and investors were lied to.
Wells Fargo has claimed that it fired 5,300 employees that chose to ignore the bank’s vision and values. In the past, the bank has claimed that such poor behavior has only been relegated to small percentages of the workforce or only certain markets. I would argue that said behavior is prevalent across the organization and that the vision and values that truly exist are to push employees to the brink and foster horrendous customer service. Wells Fargo fired 5,300 employees to make a point but the real point is that the responsibility falls on John Stumpf, CEO and his executive management for continuing to practice the hypocrisy of claiming to value employees above all while pushing their sales goals so high that they are left just trying to survive. You, more than anyone, certainly know that incentives create behaviors. Those creating the incentive systems are the ones to blame when bad behavior is the result.
Mr. Stumpf is the worst form of CEO. He fosters a management culture of delusions and psychosis in his need to only cater to Wall Street and neglect all other stakeholders. Employees stop reporting bad behavior because management wants to be oblivious to it and it makes no difference anyway. Employees also continually see things taken away while the company has continued streaks of record profits. Should you see an additional 1 percent of growth this year, please know it was taken from employee profit sharing program and might even include the reduction in contributions to employee health plans and even the coffee now missing from the breakrooms.
The bank has known of the issues of customer abuse and poor service for years while failing to address them. Furthermore, the existence of millions of fraudulent customer solutions means that quarterly customer solutions touted with the bank’s quarterly reports, have been a lie. A lie the company either knew of or chose to ignore. The more accounts it can convince its salespeople to open the greater the variability to the customer and the higher the likelihood of generating fees.
Mr. Buffett, you are invested in a company that is failing its employees, fosters ridiculous turnover rates, impacts employee families adversely and provides customer service that fails at most every level. To see such a business as a solid investment must mean that the Warren Buffett I know to be a brilliant man was, indeed, sold a lie.
I left Wells Fargo on August 8th, 2016 and my resignation letter has been read across the country. So many employees have reached out to thank me for saying what they can’t. It is my vow to continue to fight for them and the hope of Wells Fargo once again having ethics and actual vision and values. There will be no quitting until substantive change is accomplished for the good people I worked side by side with for 5 years.
To this end, I ask that you help in restoring this company to one that provides outstanding service in the interest of its customers and a commitment to its long abused employees. As the company’s largest shareholder, would you please either start divestiture or force the removal of John Stumpf, as he is unfit to continue to lead this company while he assumes no responsibility for his continued destruction of it?
I trust to see you realize the toxicity of this investment and do what is right to foster banking responsibility. Nothing less than the ethical and supportive goal of value creation would represent the Warren Buffett we studied so much in business school.
Thank you for your attention and consideration in the matter. Well over a hundred thousand people are hoping you can help them see a change for good and allow them to again serve their customers appropriately.
My sincerest regards,
Brian McKay
Attached: Resignation Letter from August 8th
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Brian McKay
August 8, 2016
John Stumpf, CEO
Wells Fargo Bank, N.A.
Mr. Stumpf:
This will be the first time I pen a resignation letter that details the extensive failures and misgivings of an organization. It will be both an indictment of Wells Fargo and corporate America in general and what I see as general lack of long term vision and positioning this organization for eventual disruption. It is a critique of shareholder prominence and the establishment of our country’s eventual fall from prominence, to which Wells Fargo is now helping to lead the way.
I have worked for some epically shitty companies in the past. My time with Qwest Communications saw the evaporation of shareholder value at a rate never before seen in the United States. It has been several years of contemplation as to which is the worst company for which I have ever been employed and I have finally settled on Wells Fargo because hypocrisy tilted the scales in the company’s favor. The fact that the company’s Vision and Values state that the most important part of the company is its employees while the company is constantly pushing good people beyond their breaking point.
There comes a point in organizations when the quest for quarterly profits and appeasement of Wall Street creates what I call organizational psychosis. Unfortunately, Wells Fargo has become organizationally psychotic. How do I know this? My 5 years and 2 months with Wells Fargo have witnessed nothing but disdain for our customers as our sales representatives are pushed to the limits of absolute futility under the guise of “best serving our customers”. Our “Culture of Caring” is unfortunately a lack of caring for the employees of the company which translates into a lack of caring for our customers. Despite the recent rash of bad press and investigations into our sales practices the sales goals of my own and other departments have been increased to a level which is near impossible. This will only further what is already a massive employee turn-over rate and result in a further lack of service and concern for our customer base. My time in sales has seen the disregard of our customers in the constant push of service people funneling customers to me for products they certainly don’t need with service that has not been performed. The good people I have had the pleasure to work with have been veterans that took care of their customers and cared to make sure they were taken care of. Despite metrics that could not be attained by most, at least a few of us did what was ethical and right in light of an organization steeped in poor service and willing to do anything to make sales goals.
It is degrading for employees to constantly see an organization that only touts its successes while consistently failing to address the existence of the company on multiple top ten lists of the most hated companies in America.
Wells Fargo is the only bank that publishes the numbers of its banking products per customer with its quarterly results. Currently, we have over 6 products (or solutions) per customer and express our desire to have 8 core solutions per customer. We tout this amount as success. The company has claimed that only a few bad actors have established bogus accounts and products for our customers, mostly in the L.A. area. I must interrupt our organizational psychosis to inform you that such fraud is endemic across the entire organization. Our customers receive debit cards they do not want. Daily it is seen that customer profiles have fake email addresses associated with them and are enrolled in all our online banking products even when the customer has indicated no desire to use that service. It seems the numbers we provide every quarter are greatly exaggerated.
I would posit that this letter does not pose any threat of cognitive dissonance within your organization. Wells Fargo is filled with yes men that trumpet shareholder value and the significance of the bank being the most valuable in the world while ignoring the collective discontentment of those at the front line of the organization. As such, the incentives that drive behaviors become more convoluted and impossible to attain at a higher frequency. It is the organization that exclaims its greatness at every moment while ignoring its weaknesses that is soon to fall and open itself to disruption. Our customer base that is victimized will eventually find a home with a smaller and more nimble organization that comes into the industry and offers them more. Eventually the organization will work its way towards its nadir.
Mr. Stumpf, you have received numerous awards for the return on shareholder value you have created while at the helm of Wells Fargo but you have only cowed to the Street while ignoring that which fosters long term growth. I consider such executive leadership to be weak and non-holistic in its nature. Soon Fed Funds rate increases coupled with Wells Fargo’s size will create a situation of diminishing returns. I would not hesitate in predicting that the company plans of cost cutting and reducing employment expenses from 57% of gross revenue will further constrain the responsiveness and the customer focus of the organization.
And so it is with great happiness that I leave Wells Fargo behind after this period of time. I have no doubt that the organization that is now myopic was once great. Upon my hiring, I held out great hope to develop a career, earned my MBA while with the company and performed with consistent excellence. Now I walk away to leave the company to constant turn over in its branches and service centers and hire kids that can’t manage their own finances, let alone those of our customers. All the while the company that claims they are the “competitive advantage” but refuses to foster development, retain them and pushes survival within the organization to the detriment of the company’s reputation, customer service and long term market potential.
You are not alone Mr. Stumpf but representative of the mega banks in general. Small and nimble is coming and fintech is growing. Can you abandon the organization psychosis in order to compete? May you have the fortitude to do so, change your course and actually develop the world class organization the company has claimed to be.
Sincerely,
Brian McKay
